Mobile Mickey
By Dan Briody, Wed Nov 20 10:30:00 GMT 2002

Walt Disney is tapping into wireless as the next frontier.


Mickey Mouse, Walt Disney’s legendary cartoon character, turned 74 years old on November 18th. Since Mickey was born – originally conceived as Mortimer Mouse, a name that was summarily dismissed my Mrs. Disney – the wispy, squeaky little guy has undergone many, many changes. But never in his wildest imagination could Walt Disney have predicted back in 1928 that someday his rascally rodent would be zipping through thin air, a central character in the still-unfolding drama that is the wireless industry.

For two years now, the Walt Disney Company has been on the leading edge of wireless content licensing, signing an astounding string of deals with wireless carriers and phone makers from around the world. The deals cover everything from the timeless Mickey Mouse and Donald Duck to the latest newcomers to the Disney family, Lilo and Stitch. And they range from simple sports scores and stock quotes from Disney companies ABC and ESPN to content and characters from Disney movies. It’s an all-Disney-all-the-time strategy wireless providers can’t get enough of.

And while wireless has proven to be an excellent way for Disney to extend and burnish its world famous brands to a whole new generation of customers, the strategy has proven to be a potential money maker for the company. However, doing business in this medium has not come without its frustrations for Disney. Waiting for wireless companies to sufficiently market next-generation wireless services and provide platforms that can handle Disney’s content has made making money anywhere but Japan a difficult task. Welcome to the wacky world of wireless, Mickey.

A Wireless Whirlwind

It all started innocently enough back in 1999, when Disney launched what is now seen as primitive text-based content. The service basically consisted of some limited informational blurbs from ABCNEWS and ESPN. It was rudimentary stuff to be sure, but Disney was one of the first major media outlets to embrace the still-emerging wireless medium. From these modest beginnings, Disney launched a litany of deals that has covered virtually every significant mobile market in the world.

“At first we looked at it as an extension of our Internet presence,” explains Larry Shapiro, executive vice president of business development at Walt Disney Internet Group, the subsidiary of Walt Disney that handles electronic distribution of the company’s content. “But it has evolved to beyond a simple brand extension into content offerings tailored to the unique attributes of mobile.” Shapiro points out that most of those attributes are, of course, “negative, like small screen size or limited keypad.”

Despite the early challenges of the wireless market, Disney pressed on. The first deal of import was in August of 2000, when the company launched a Disney-branded content service with Japan’s NTT DoCoMo and its wildly successful i-Mode wireless phone service. Called Disney-i, the content included features like “Character Town,” with daily character screen savers; “Melody Palace,” a daily Disney song that plays as a ring tone; and “Game World,” in which users can search a virtual Disneyland for cartoon characters. It was like a tiny little amusement park right in the phone. But Disney didn’t stop there.

They signed deals with SBC Wireless in the U.S. to do interactive gaming through ESPN.com, in which users participate in a daily contest to win $1000. They arranged with Sprint PCS to provide content from ESPN.com, ABCNEWS.com, and Go.com for weather, white pages, lottery and horoscope information. Next it was AT&T Wireless and a contest that encouraged users to pick the winners of the U.S. college basketball tournament. Then they brought their content to Nextel in April of 2001. And then to OnStar, the wholly owned subsidiary of General Motors that provides in-car wireless services. Disney was just getting started.

The company’s international business really started to take off, and Disney realized that while they were based in Hollywood, the most advanced wireless markets were outside of the United States, like that of Japan. That’s when the international deals started to rain down. First it was Hong Kong carriers CSL and Hutchison, then it was Taiwan’s TCC (Taiwan Cellular Corporation). And Disney went back to Japan to sign up J-Phone and their J-Sky wireless Internet platform. Not to be left out, Disney hooked up with T-Mobile in Europe, SK Telecom in South Korea, and Djuice, the mobile Internet service provider in Scandinavia. Suddenly, Disney was everywhere.

Mickey Mouse Operation

Disney’s reasons for going wireless have changed over time. In the beginning, the company saw wireless as a good way to market what it Shapiro calls “the three key brands”: Disney, ABC, and ESPN. But within those key brands, Disney owns dozens, possibly hundreds, of sub-brands, like Mickey Mouse, many of which are better known and equally important to its business. Sending images of those sub-brands, along with content from ABC and ESPN, throughout the wireless airwaves was a great way to increase their exposure. The cost was minimal – in most cases carriers and phone companies pay Disney to license their content and resell it – and the opportunity was ripe. It seemed like a no-brainer.

And it was. In the U.S. market alone, there are Disney animated ringtones (think “It’s a Small World” theme), screensavers, and wallpapers. There are games ranging from Disney’s Lilo & Stitch’s Space Escape to EXPN Snowboarding. The data services cover everything from news headlines to daily soap opera updates. It’s safe to say the brand has been sufficiently extended. Disney was covering its costs on their wireless marketing efforts, but it wasn’t exactly adding to the bottom line.

But then something started happening that wasn’t quite expected. They started making money. Currently, Japan is the only market in which Disney is bringing in significant revenues. The company does not break out its revenues by sector, so it’s impossible to say how much Disney is making from wireless. But Since Disney Mobile launched in Japan in August of 2000, they have grown their portfolio to 32 different content offerings on three carriers (DoCoMo, J-Phone, and KDDI), and have more than 3 million paid subscriptions at between 100 yen and 300 yen a month. The business has taken off, and given Disney, and other content providers, a glimpse of the true value of wireless as an outlet for their products.

“In Japan this is a significant business for us,” says Shapiro. “And in the rest of the world, we are in the beginning of this adventure.” Shapiro explains that the difference in Japan versus the rest of the world is that the infrastructure, wireless service, and billing are in place to offer the types of animated clips that Disney can actually make money from. Frustratingly, the company is in a holding pattern in the rest of the world, and doesn’t intend to stick its own neck out on the front lines of wireless progress. “We are waiting for some things to fall into place,” says Shapiro. “The carriers have to have the billing platforms, and they have to be willing to market the services. But we’re not going to invest the massive dollars to find the Holy Grail in wireless. It’s the carriers that have to enable the customer relationship.”

In many ways, it is a classic chicken-and-egg situation. The carriers often claim that it is content that is going to drive the market forward to next-generation services. But content providers complain that if the devices and service can’t handle multimedia, than they are just going to wait until the technology is ready. Not surprisingly, little gets done.

Keeping it Safe

There are other concerns that content provider have however, and among the most pressing issue facing Disney at the moment is how to protect its valuable brands. It is alarmingly easy to download a game, image, or ringtone, and send it along to dozens of friends, violating any number of copyright and digital rights laws. In particular, using Bluetooth, an end user can beam just about anything to other users or on to multiple devices. As such, Disney cannot allow its content to be downloaded onto Bluetooth devices, and has no deals with devices that carry the Bluetooth capability.

“We have to take an active interest in protecting our library,” says Shapiro. “It is very easy for a consumer, once they have bought a piece of entertainment, to send it along to someone else. So we’re working with the industry to find way to allow this business to expand, and develop a way to protect our property.”

Shapiro says there are only a handful of devices that Disney won’t do business with, out of hundreds of different handsets it will. But just like the Internet did years ago, and in many ways is still doing, wireless will need to solve the sticky problem of digital rights management if content providers will ever feel comfortable ponying up their stuff.

Disney is looking at different ways to expand its wireless presence, but they are cautious and measured in their approach. Some things that have seen early success, like SMS interaction with TV, have not gotten the execs at Disney excited. Of Sprint PCS’ deal with Fox Sports, which encourages Sprint customers to use their phones to vote on coaching decisions and trivia questions while they watch the World Series or NFL games, Shapiro says simply, “That’s just Sprint buying advertising, and we’re more focused on subscription-based services.” But Disney can go as slow as it wants, limiting its risk, and maximizing it reward, because no matter how fast or slow wireless data takes off, there will always be a demand for mobile Mickey.

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After failing miserably at every attempt to become the next great American author, Dan Briody settled in San Francisco and started writing about the technology revolution in the mid-90s. Today he is the author of Red Herring's Wireless Watch column, and he is still trying to write the great American novel.